Wilmar Profit Falls 70% on Oilseeds, Grains, Plantations

Wilmar International Ltd. (WIL), the world’s biggest palm-oil processor, said its second-quarter profit dropped 70 percent following losses at its oilseeds and grains business and on lower earnings from its plantations.

Net income fell to $117.1 million in the three months ended June 30 from $393.1 million a year earlier, the Singapore-based company said today in a statement. That missed the $316.5 million average of three analyst estimates in a Bloomberg survey. Sales rose 4.3 percent to $11 billion.

Wilmar’s profit dropped a second straight quarter as higher soybean prices, combined with escalating competition hurt crushing margin for companies. Its oilseeds and grains division posted a pretax loss of $40 million in the quarter because of negative crushing margin and depreciation of the yuan against the U.S. dollar, Wilmar said today.

“It’s quite disappointing,” Ben Santoso, an analyst at DBS Group Holdings Ltd. in Singapore, said by phone. “We still have some concern on the overcapacity in Chinese crushing capacity as well as recent rise in soybean prices, which would impact feedstock prices.” Santoso said he will review his full- year earnings forecast for Wilmar.

The stock gained 1.8 percent to S$3.39 at the close in Singapore today, before the earnings announcement. Wilmar has declined 32 percent this year, making it the worst performing member on the benchmark Straits Times Index.

Poor Performance

Wilmar also recorded a pretax loss of $34.6 million, compared with a profit of $34.9 million a year earlier, at its non-core businesses on lower fertilizer and shipping profits and higher losses from investments in securities.

“The poorer performance was largely due to losses at oilseeds and grains from a continued difficult operating environment in China and lower plantation profits and prices, a drop in production yield and higher production cost,” Wilmar said in the statement.

China Agri-Industries Holdings Ltd. (606), the Hong Kong-listed unit of China’s largest grains trader Cofco Ltd., said June 28 first-half profit fell as grain and soybean prices rose while demand for starch and rice was sluggish and China’s oilseeds crushing capacity continued to expand.

Soybean futures traded in Chicago averaged $14.03 a bushel in the quarter, compared with $13.61 a bushel a year earlier, and reached a record $16.915 a bushel on July 23 as the U.S. endures its worst drought in a half century.

Palm Oil Mills

Pretax profit from Wilmar’s plantations and palm oil mills fell 45.3 percent to $79.2 million in the quarter. Production yield dropped 15 percent due to low crop in Malaysian states Sabah and Sarawak and after effects of dry weather.

The palm and laurics processing business posted a 4.6 percent gain in pretax profit even though sales volume rose 17 percent. The drop in margins is due to lower prices for oleochemicals and biodiesel products, Wilmar said.

Pretax loss at its sugar business widened to $60.3 million, from $7.1 million a year earlier, due to wet weather in Australia and higher maintenance costs.

Wilmar’s consumer products business posted a 7 percent gain in sales volume and margin improved after the company increased edible oil prices in China in March.

To contact the reporter on this story: Michelle Yun in Hong Kong at myun11@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net

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